Risk Management. Every factoring company in our industry knows the importance of properly evaluating their portfolios. Whether it’s factoring, insurance, mortgages or any other type of lending, mitigating losses is vital for every company’s survival. Just a few years ago we saw firsthand how the mortgage meltdown crippled the entire global economy due to lack of controls and poor risk management. In the factoring community the same holds true. Every factor conducts their due diligence using a specific set of guidelines that allows them to protect their security interest in the receivables of their clients while allowing enough room to generate new sales. In many ways it is a balancing act between sales and underwriting. The sales … [Read more...]
Projecting Your Success In The Factoring Industry
By reading the headline of this article one would assume that I will be expressing pearls of wisdom about how to become an instant success in the factoring industry. It’s really easy, right? All you need to do is to acquire some capital either through a bank or investor, fund some invoices and walk your way to fame and fortune. Whether it’s a new factoring company or any startup, one of the easiest things to do is to create an excel spreadsheet with some basic assumptions and just double and triple income for the next few years. We recently had a recent startup visit our office looking for capital. Although they had been in business for less than a year I requested a set of projected financial statements including a profit and … [Read more...]
Red Flags of Factoring: When to Walk (or Run) Away From a Deal
“Time is money” is a cliché, but also a reality of the factoring industry. Unfortunately, all too often we waste time – and money – chasing prospects and shopping deals to any number of funders without identifying the fundamental issues that will doom a deal before you make the first pitch. Before you invest in any deal you must ask: will any rational funder make this work? Without delving into funder preferences and gray areas, there are five red flags you should look for in any factoring lead you come across: Medical deals with very low dollar amounts Medical factoring in particular is very time and effort intensive. While some medical factoring companies will at least take a look at very small deals, the majority will determine that … [Read more...]
A Nation Divided by Healthcare Options Poses Challenges for Medical Factoring
The expression of a house divided goes back to the beginning of the Common Era and further, if a linguist was to trace it. Sam Houston spoke it most famously in 1850 when he claimed “A nation divided against itself cannot stand” during a debate on the Compromise of 1850. Eight months into full Affordable Care Act coverage, it appears that we are once again a nation divided – this time, into the states that chose to expand Medicaid and the states that did not (including the four that have not decided either way). When factoring healthcare receivables, it is important to be familiar with each state’s policy and what the implications may be for your business. Medicaid Expansion Expansion of Medicaid ties in to the tax credits available to … [Read more...]
Are There Too Many Factoring Companies?
Over the last several years it seems that competition among factoring companies has increased dramatically. The supply and demand between invoice factoring companies and qualified prospects has tipped to the point where too many funders are chasing too few deals. Just look around at some of the social media boards where a broker posts a potential lead and ten different factoring companies respond to it. Economics 101 teaches us that a perfectly competitive market structure is one where there are many buyers and sellers, homogeneous products and relatively free entry and exit in the marketplace. I will be the first to go on record to say that I believe that competition is the cornerstone of our economy which makes us the great … [Read more...]
10 Ways To Start Marketing A Factoring Business Online
You know you need to start marketing your factoring business online but where do you start? The time, cost, and sheer volume of information can be overwhelming – paralyzing even! Don’t despair, here’s your... Ten Step Online Marketing Plan for Factoring Companies Step 1 - Build A Factoring Business Website In the U.S. alone there are over 250 million people or 80% of the population using the Internet (Source: Internet Live Stats) and the first place they go to check something out is an online search. In 2014, websites are the new storefronts! The good news is a website is much cheaper than retail or office space, with great web design options available for under $500. And let's not forget mobile users! A website should be … [Read more...]
Fighting An Uphill Battle In The Factoring Industry
Have you ever heard the saying that perception is reality? Although I’ve written tons of articles, spoken at numerous SBA and financing workshops while preaching the benefits of invoice factoring, I’m still amazed about how our industry is perceived in the finance industry. Those of you in the factoring industry know what I’m talking about. It’s the negative stigma associated with invoice factoring. So often I’ll be attending a networking event where a CPA will tell me that he consistently advises his clients to stay away from factoring and that they should only use it as a last resort if they need cash. Then there are the small business owners who don’t even know what invoice factoring is or how it can benefit their cash flow. Invoice … [Read more...]
Invoice Factors and Banks
One of the most common slogans you’ll see on any factoring company’s website is how they are better than most banks in getting businesses working capital. Conventional thinking is that banks qualify prospective clients based on the financial stability of the company whereas invoice factoring companies focus more on the credit worthiness of client’s customers. Therefore a prospect with little or no credit or one that has been in business for a short period of time can qualify for a factoring line assuming they have strong customers. For example, many banks will ask for several years of tax returns, financial statements and sufficient collateral to offset the loan. When dealing with the SBA, new companies will have to submit a business … [Read more...]
Are Factoring Companies Prepared to Handle Your Leads?
The factoring world is changing – can your funding sources keep up? Your success as a broker hinges on your ability to place prospects with factoring companies that will close the deal. It is critical, then, that you focus you energy on working with funders that are prepared on every level to accept leads from brokers. So, are factoring companies prepared to effectively handle your leads? Below are some important things to consider before sending leads to any factoring company. Have a conversation with each funder before referring deals in which you learn their expectations of you, establish your expectations of them and make sure you are comfortable with their ability to meet your requirements. If their system doesn’t measure up, you … [Read more...]
The Balancing Act of Factoring Invoices
In past articles I have addressed the need for understanding your client’s business as well as having a consistent set of policies and procedures to ensure you effectively manage the risk of factoring invoices. However, what happens when you run across those out of the box deals that do not fit nicely into your company’s comfort zone? Instead of immediately throwing these deals away you might want to consider some adjustments you can make to mitigate the risk. Although we all like to fund deals that are in our sweet spot in terms of size and industry, I have found that some of our best success stories were with clients in industries that we never would have imagined funding. Some past examples include speech therapists, a startup … [Read more...]